THE ONTARIO ENERGY BOARD
YEAR ENDING DECEMBER 31,; 1968.
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TELEPHONE 790 BAY STREET
365-2851 ONTARIO ENERGY BOARD Toronto 2
February k, 1969.
The Honourable J. R. Simonett,
Minister of Energy (? Resources Management,
Toronto, Ontario. _
I have the honour to present the Annual Report
of the Ontario Energy Board for the calendar year 1966.
A. R. Crozier,
NINTH ANNUAL REPORT
THE ONTARIO ENERGY BOARD
YEAR ENDING DECEMBER 31, 1966.
This report is submitted in accordance with section 9
of The Ontario Energy Board Act, 1964, and it outlines the
activities of the Board for the calendar year ending December
The Ontario Energy Board acts under the authority of
The Ontario Energy Board Act, 1964, and amendments, references
from the Minister of Energy and Resources Management pursuant
to sections 6 or 10 of The Energy Act, 196i+, those sections of
The Municipal Franchises Act that pertain to gas, and one section
of The Assessment Act.
The functions of the Board are as follows:
(a) Under The Ontario Energy Board Act. 1964 :
Approving and fixing the rates and charges for the sale,
transmission, distribution and storage of gas in the
Granting leave to construct transmission pipe lines, pro-
duction lines, distribution lines and stations.
Granting authority to expropriate land for pipe lines and
Recommending designation of lands as gas storage areas.
Authorizing storage of gas in designated gas storage areas.
Requiring and regulating the joining of interests in gas
or oil pools.
Examining and reporting on any matters pertaining to energy
referred to the Board by the Lieutenant-Governor in Council,
(b) Under The Energy Act, 1964 :
Examining and reporting on certain matters referred to the
Board by the Minister of Energy and Resources Management.
( c) Under The Municipal Franchises Act :
Approving terms and conditions of franchise agreements.
Granting Certificates of Public Convenience and Necessity.
Digitized by the Internet Archive
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(d) Under The Assessment Act :
Determination of proper classification of pipe lines for
assessment purposes, when classification as transmission
lines is in dispute.
During the year the Board held one hundred and thirteen
hearings classified as follows:
The Ontario Energy Board Act, 196^.
Rates and other charges
(Section 19) 31
Leaves to construct transmission pipe lines
(Section 37) 12
Expropriations for pipe lines
(Section kO) J+l
Joining of interests in oil pool
(Section Zk) 1
Drilling of wells in designated gas storage areas
(Section 23, referred by Minister) k
Reference by Lieutenant-Governor in Council
Rescinding and Amending Orders
(Section 30) 7
The Municipal Franchises Act
Terms and conditions of gas franchise agreements
(Section 9). . ..,,,. * £
Certificates of Public Convenience and Necessity
(Section 6) j . . £
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In accordance with the usual practice, the Board held
its hearings at locations most convenient for the applicants
and other interested parties. Sixty-two applications were heard
in various communities outside Toronto.
The Board held thirteen Board meetings as well as many
pre-hearing conferences and other meetings during the year. In
addition, several trips were made to the sites of petroleum and
natural gas industry projects proposed or under construction.
Two Board members participated in the 1966 Conference
of Canadian Public Utilities Commissioners which was held in
Halifax, Nova Scotia, on June 20th, 21st and 22nd. Representa-
tives from nine of the provinces studied and discussed a number
of important problems of rate regulation, including depreciation,
the impact of inflation on utility financing, contributions in
aid of construction and acquisitions of plant at nominal cost.
No amendments were made to The Ontario Energy Board Act,
1964 at the 1966 session of the Legislature and no changes were
made to the Board ? s regulations respecting rules of procedure.
During the year the Board heard thirty-four applications
for the fixing and approving of rates and other charges for the
sale of gas. About half of these applications were for the
initiation or continuation of interim rates pending a final
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determination by the Board. The other hearings were related
to the extension of existing rates into areas being served for
the first time and for rates covering the sale of large volumes
of gas for industrial use.
Over one-half of all natural gas sales in the Province
of Ontario is to industry and this percentage will increase in
the future. Competition for the industrial energy market is
keen but the gas utilities, assured of adequate gas supplies
since the completion of the Great Lakes Gas Transmission Company
project, have been successfully negotiating with industry for
(the sale of very large volumes of gas.
The Union Gas Company of Canada, Limited received Board '
approval for a policy of reading meters on a bi-monthly basis
for residential and small commercial customers. A computer
estimation, based on historical data and adjusted for average
temperature variations, is used to calculate the customers bill
in the intervening month. A considerable saving in meter read-
ing costs has been realized where bi-monthly reading has been
The natural gas rates charged by utility companies in
the Province did not increase during 1967. Operating expenses
have been increasing, however, and the companies are particularly
concerned about the rising cost of the capital necessary to
finance transmission and distribution system extensions.
The Board keeps a close watch on the level of earnings
•of all the major gas distributors in the Province and the earn-
ings of any company will be reviewed at public rate hearings
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whenever this seems necessary.
Public hearings on the rates charged by Northern and
Central Gas Corporation in its Ontario Division will be held
in 1969, commencing in July.
APPROVALS AND CERTIFICATES
During the year the Board approved the terms and condi-
tions of seven franchise agreements negotiated by natural gas
distributors with municipalities. Certificates of public con-
venience and necessity for the distribution of natural gas were
granted by the Board to companies extending gas service to the
Townships of Caledon East, Whitby East, Wellesley, Hutchison and
Seymour. A limited certificate was approved for the Township of
Brighton and, in addition, certificates were issued for the Vil-
lage of Port McNicoll and the Police Village of St. Clements.
With the completion of the Great Lakes Gas Transmission
Company project, natural gas was made available in the City of
Sault Ste. Marie and the distribution system was converted from
propane-air to natural gas in October, 1968.
JOINING OF INTERESTS FOR THE PRODUCTION OF OIL
On October 29, 1968, the Board issued an order joining
the royalty interests within the Gobies Pool, a Cambrian forma-
tion oil production area. Rayrock Mines Limited, the operator
of the Pool, the working interests of which are held jointly by
Rayrock and Bow Valley Leasing Limited, had been unable to
negotiate a voluntary unitization agreement with all lessors and.
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without such an agreement, a Board order was necessary to ap-
portion the royalty benefits of future oil production operations
on an equitable basis. In making the order, the Board estab-
lished a unit area for the purpose of drilling and operating
wells and provided for the initiation and carrying out of second-
ary recovery operations by means of water flooding.
Rayrock witnesses presented evidence which indicated
that total oil recovery from the Pool would be greatly enhanced
by water flooding operations.
In dealing with the technical aspects of this applica-
tion, the Board had valuable assistance from the professional
staff of the Department of Energy and Resources Management who
were working at the same time on a related application to the
Minister for a permit to inject water for the secondary recovery
CONSTRUCTION OF PIPE LINES
The Board heard and approved a number of applications
for leave to construct natural gas transmission pipe lines. The
major lines approved and constructed during the year were as
a) A 20" United Gas Limited pipe line, 9 miles long, from the
Township of West Flamborough gate station to a regulating
station site on Burlington Street in Hamilton. The completion
of this line provides the Hamilton distribution area with a
looped high pressure system assuring reliability of supply
as well as the additional volumes required by the market.
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b) An 8" Union Gas Company of Canada, Limited transmission line,
12 miles long, was constructed from a new valve site on the
10" Windsor-Port Alma pipe line in the Township of Rochester
to the Town of Leamington, This line was required to re-
inforce the gas supply system in the Leamington-Kingsville area.
c) The Union Gas Company constructed a 15 mile, 12", pipe line
connecting the existing 26" and 3i+" transmission lines in the
Township of Lobo with a major city gate station in the southern
part of the City of London. The rapidly expanding market re-
quirements in the London, St. Thomas and Talbotville areas
necessitated this construction.
d) The Consumers* Gas Company constructed a 4" transmission line
from the existing Trans-Canada Pipe Line Limited facilities
in the Township of Brighton to the Town of Campbellf ord, a
total distance of 13 miles. This line will supply natural gas
to a new distribution system in the Town of Campbellford as
well as to customers adjacent to the pipe line route.
The Union Gas Company also constructed a 20" trans-
mission line from its Dawn compressor station to Dover Centre,
a distance of 17 miles. This pipe line, looping an existing 16"
line, is necessary to meet the growing gas requirements of the
Windsor-Chatham area and its construction had been approved by
the Board in 1967 .
After granting leave to construct and following a public
hearing, the Board may authorize the owner of the pipe line to
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expropriate land for that purpose. During the year the Board
held forty-one hearings to expropriate land for pipe lines and
stations. The public hearings are usually held in the area af-
fected, in order that the landowners may have the fullest op-
portunity to be heard.
In authorizing expropriation, the Board is not empowered
to deal with compensation matters. In the past, compensation
has been determined by a board of arbitration appointed by the
Minister under The Ontario Energy Board Act, I96i+. However,
with the enactment of The Expropriations Act, 1968-69, com-
pensation will in future be determined by the Land Compensation
Board created under that Act.
As in previous years, the Government again appointed a
special inspector to act as liaison between the landowners and
the pipe line company during construction and clean-up periods.
This inspector also ensures compliance with any terms and con-
ditions of Board orders related to the construction.
UNIFORM SYSTEM OF ACCOUNTS
Significant progress was made in 1968 towards full
implementation of the prescribed Uniform System of Accounts.
In particular, the Board issued Accounting Orders to The Con-
sumers T Gas Company together with Reasons for Decision in which
the Board supported the conversion of the Company's observed
depreciation reserve applied to the 1955 redetermined plant
values, to one based upon an estimated service life basis. The
Company is proceeding with its detailed accounting studies of
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post 1955 property transactions and anticipates presenting these
to the Board for approval as they are completed.
In December of I96& Northern and Central Gas Corpora-
tion Limited and Union Gas Company of Canada, Limited presented
to the Board their respective requests for approvals, consents
and determinations as provided for in tfiTe Uniform System. The
Board expects to dispose of these matters in 1969 with the poss-
ible exception of those dealing with the controversial subject
of depreciation. Because of the importance of depreciation in
gas utility accounting and rate-making, this subject will require
extensive discussions and exchanges of information by the Board,
its staff and the companies before decisions can be made.
As in the past the staff of the Board will continue to
work closely with the staffs of the Gas Utilities in order to
expedite the full implementation of the Uniform System of Ac-
counts for all Class "A" Gas Utilities.
There were no additional gas storage areas designated
or authorized for use during the year. The development of the
Kimball-Colinville Pool was continued by the operator, Tecumseh
Gas Storage Limited. The company drilled six new wells to in-
crease the Pool's deliverability capacity and to provide addition-
al information about the reservoir.
The storage pools of southwestern Ontario provide as-
sured service to most of the natural gas customers in the
Province, not only by way of winter peak shaving but by assur-
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ing a standby supply of gas that can be drawn on in situations
where pipe line deliveries cannot, for some reason, meet re-
quirements. The delay in the construction of the Great Lakes
project made it necessary for the distribution companies to draw
additional gas from storage during the 1967-68 heating season
and the storage pools have been operated on a number of occasions
to provide gas in emergency situations arising from temporary
curtailment in pipe line deliveries.
While there appears to be a sufficient reserve of stor-
age capacity in southwestern Ontario, the search continued during
the year for suitable storage formations closer to the major
market areas. Eastern Ontario especially could benefit from
the discovery of suitable underground storage and the Board has
followed closely and with a great deal of interest the develop-
ment of a potential aquifer (water bearing formation) storage
pool at Russell, near Ottawa, by The Consumers 1 Gas Company. Most
indications to date have been favourable and the Company is planning
a test injection in the near future. The Board granted approval
for the construction of a temporary transmission line which will
carry gas for this test injection from the Trans-Canada Pipe
Northern and Central Gas Corporation Limited completed
construction in September of Ontario T s first large scale natural
gas liquefaction and regasif ication plant at Hagar, near Sudbury.
The plant has an above ground steel tank storage capacity of
600,000 MCF and an output capacity of 45,000 MCF per day. The
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liquefied natural gas plant will be used to improve Northern
and Central's system load balance and to obtain better utiliza-
tion of contracted demand gas. This plant and the aquifer stor-
age formation, if successfully developed, will substantially
benefit gas customers in eastern and northernOntario.
The Board presently consists of Mr. A. R. Crozier as
Chairman, Mr. A. B. Jackson and Mr. I. C. MacNabb as Vice-
Chairmen and a part-time member, Mr. D. M. Treadgold, Q.C.
Mr. Henry Strozyk, P.Eng., was appointed Board Engineer
during the year to bring the staff complement to seven.